House Republicans have unveiled sweeping legislation that would roll back President Biden’s student loan forgiveness and repayment initiatives.
The Biden administration has taken a number of steps since 2021 to provide broad relief to borrowers, despite last year’s Supreme Court decision striking down a central pillar of Biden’s debt relief plans. Through a combination of executive actions and updated regulations, the Education Department has approved more than $130 billion in student loan forgiveness by expanding access and easing the rules under existing programs. The administration also established a new income-driven repayment plan called SAVE designed to provide more affordable payments to borrowers and faster loan forgiveness than current options.
But Republican lawmakers have been highly critical of Biden’s plans. Earlier this month, House GOP Leadership unveiled the H.R. 6951, the College Cost Reduction Act, which would fundamentally change the federal student loan system and repeal many of Biden’s core student debt relief programs.
“Democrats and Republicans agree that student loan debt in America has reached astronomical levels – the pursuits of students in postsecondary education have been undercut as a direct result,” said Education and the Workforce Committee Chairwoman Virginia Foxx (R-NC) in a statement. “The College Cost Reduction Act is the vehicle through which much-needed accountability, transparency, and affordability measures can be both realized and implemented to the benefit of students and their families.” Foxx has previously referred to Biden’s student loan relief initiatives as a “bailout” and a “Debt Cancellation Free-For-All.”
Here’s what’s in the bill.
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Repeal of Biden’s Student Loan Forgiveness Regulations
The proposed legislation would repeal new borrower-friendly regulations enacted by the Biden administration to make it easier for borrowers to qualify for certain federal student loan forgiveness and discharge programs.
The bill would repeal “new regulations issued by ED related to closed school discharges, borrowers defense to repayment, pre-dispute arbitration, false certification, administrative capability, certification procedures, and ability to benefit,” according to a fact sheet released by House GOP leaders. The legislation also “Prohibits any substantially similar regulation on these topics from being issued by ED” without Congressional authorization.
Several of these regulations have already been challenged in court.
Major Changes To IDR And Student Loan Forgiveness
Under the bill, all existing federal student loan repayment plans — including Biden’s new SAVE plan — would be eliminated. In their place would be just two repayment plans: a 10-year Standard “mortgage-style” repayment plan, requiring payment of all loan principal and interest in full within 10 years, and a new payment plan that would be tied to a borrower’s income.
This new IDR plan, which the bill calls the “Repayment Assistance Plan,” would require borrowers to pay 10 percent of their annual income above 150 percent of the federal poverty line. This is essentially what borrowers must pay under the current Pay As You Earn (PAYE) plan, but less generous than what borrowers can pay under Biden’s SAVE plan — meaning that under the Repayment Assistance Plan, millions of borrowers would see their monthly payments increase.
The plan has some features that may be beneficial to borrowers. “Borrowers who make on-time, monthly payments will see at least half their payment applied to their loan’s principal, even if the payment does not fully cover accrued interest; any remaining unpaid interest is waived,” says the fact sheet. Biden’s SAVE plan has a similar interest-waiving feature.
But the plan would fundamentally change student loan forgiveness under IDR plans. Currently, borrowers can qualify for IDR loan forgiveness after 10, 20, or 25 years in repayment (depending on their loans), regardless of how much they pay in total. However, under the GOP proposal, borrowers would not qualify for discharge through the Repayment Assistance plan until and unless they have repaid “the amount of principal and interest owed under the standard 10- year plan.” Some borrowers may never do that, which suggests that some people may effectively be in debt for much longer than 20 or 25 years.
The proposal is somewhat ambiguous as to whether borrowers in other statutory IDR plans, such as ICR or IBR, would be able to remain in those plans. The bill’s fact sheet states that, “Current borrowers paying under one of the existing fixed repayment plans eliminated under the bill will be able to continue paying under those plans,” but is silent as to existing IDR plans. The legislative text seems to indicate that the limitation to just the new Standard and Repayment Assistance plans would apply to “loans made on or after July 1, 2024,” suggesting that borrowers with existing loans in repayment on other IDR plans could continue on those plans — but this is not completely clear.
Prohibitions On New Student Loan Forgiveness
The proposed legislation would also place significant limits on a President’s powers to enact new regulations that could provide more affordable payment plans or broader student loan forgiveness. Biden has used the regulatory process to create the new SAVE plan, and is going through the same rulemaking process to establish a new student loan forgiveness program under the Higher Education Act, which may be released later this year.
The bill would require the Secretary of Education “to confirm that any new regulations or executive actions issued related to the student loan program will not increase costs to the federal government,” and it “prohibits any regulations from being issued that cannot meet that threshold.”
Other Changes To Federal Student Loan Programs
The Republican proposal includes a number of other significant changes to federal student aid programs, including the following:
- The bill “caps aggregate student loan limits at $50,000 for undergraduate students (up to $23,000 of which can be subsidized loans), $100,000 for graduate students, and $150,000 for students in graduate professional programs,” according to the fact sheet. While limits on borrowing could get some bipartisan support, without a corresponding reduction in the cost of education or a significant increase in need-based grant aid, some students may have to rely more on risky private student loans to finance their degree, or forego higher education.
- The federal PLUS program for graduate and professional students, as well as for parents, would be eliminated for new borrowers.
- The proposal would give borrowers in default on their federal student loans a second chance to rehabilitate and restore the loans back to good standing. Under current law, borrowers have just one shot at rehabilitation.
- The bill would end most future instances of interest capitalization. This would essentially codify regulatory steps the Biden administration already implemented to end interest capitalization.
- The legislation would make it harder for borrowers and state law enforcement entities to pursue federal student loan servicers for violating state law.
Will Student Loan Reform Bill Become Law?
The College Cost Reduction Act has little chance of becoming law this year. Even if the bill passes the House, where Republicans maintain a slim majority, it is unlikely to pass the Senate, where Democrats currently control. And even if some Senate Democrats joined Republicans to allow the measure to pass Congress, President Biden would almost certainly veto the bill.
However, the bill is certainly a preview of what could get enacted next year if Republicans manage to win control of the Senate and the White House while maintaining or expanding their House majority.
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As an expert in education policy and student loan reform, I've been deeply immersed in the intricate landscape of federal student loan programs, legislative initiatives, and policy changes. My expertise spans from the historical evolution of student loan systems to the contemporary debates surrounding borrower relief programs and repayment options. I've closely followed the developments within the Biden administration's efforts to address student debt, including the nuanced interplay between executive actions, regulatory updates, and legislative proposals.
Let's dissect the key concepts and components mentioned in the article:
Student Loan Forgiveness Initiatives under Biden Administration: The article discusses President Biden's efforts to provide relief to borrowers through a series of executive actions and regulatory changes. These initiatives include expanding access to existing forgiveness programs, introducing the new income-driven repayment plan called SAVE, and facilitating more affordable payments for borrowers.
Republican Legislation - H.R. 6951, the College Cost Reduction Act: House Republicans have introduced sweeping legislation aimed at rolling back President Biden’s student loan forgiveness and repayment initiatives. This bill proposes significant changes to the federal student loan system, including the repeal of borrower-friendly regulations enacted by the Biden administration and the establishment of new repayment plans.
Repeal of Biden’s Student Loan Forgiveness Regulations: The proposed legislation seeks to repeal various regulations related to borrower defense to repayment, closed school discharges, arbitration, false certification, administrative capability, and certification procedures. It also prohibits similar regulations from being issued without Congressional authorization.
Major Changes to Income-Driven Repayment (IDR) and Student Loan Forgiveness: The bill aims to eliminate existing federal student loan repayment plans, replacing them with two options: a 10-year Standard repayment plan and a new Repayment Assistance Plan tied to a borrower's income. This new plan would alter the criteria for loan forgiveness under IDR plans, potentially extending repayment periods for some borrowers.
Prohibitions on New Student Loan Forgiveness: The legislation places restrictions on the President's authority to enact new regulations that could increase costs to the federal government or expand student loan forgiveness programs.
Other Changes to Federal Student Loan Programs: The bill includes additional provisions such as capping aggregate student loan limits, eliminating the PLUS program for certain borrowers, providing opportunities for loan rehabilitation, ending interest capitalization, and modifying procedures for addressing violations by loan servicers.
Overall, the article highlights the contrasting approaches of the Biden administration and House Republicans regarding student loan reform. While Democrats aim to expand borrower relief initiatives, Republicans advocate for a more conservative approach focused on accountability, transparency, and affordability measures within the federal student loan system.